Results tagged “wall street” from Economic Alert

California Controller John Chiang issued a press release this afternoon announcing that the state will likely run out of money by the end of October and will need to borrow $7 billion to meet its obligations through the end of the fiscal year (that's June 30, 2009). With the national credit crisis looming large, that borrowing won't be easy. Chiang urges Congress to take quick action to restore confidence in the financial markets.

His quote:

"There is no question that today's economic uncertainties and a tight credit market may create enormous challenges to the State to borrow at one time the entire $7 billion I have determined the State will need to meet its obligations through the end of the fiscal year. The difficulty is also compounded by the short window of time between now and the final days of October, the period in which my office has projected the State will likely run out of cash.

"It is critical that Congress take swift action to adopt an economic recovery plan that can calm the fears of American consumers, stabilize the market and loosen the credit stream we will need to continue to provide quality programs and services Californians expect and deserve."

Earlier today, Gov. Arnold Schwarzenegger sent a letter to California's Congressional delegation, urging them to support the bailout plan, stressing that "this plan is not a 'bailout' for Wall Street. To the contrary, the plan is about protecting Main Street."

Unless Congress acts quickly, Schwarzenegger warned, "California will be unable to sell voter-approved bonds for the highway, school, housing and water construction projects that our state is relying on to help carry us through this difficult economy."

Bottom line: "I am writing to urge you to vote in favor of the Emergency Economic Stabilization Act. This plan is critical to the well-being of every community in California and across the nation. Swift action in Congress is needed to restore confidence in our financial system.

President George W. Bush and Treasury Secretary Henry Paulson this morning announced the government is working on a sweeping bailout plan that could cost taxpayers hundreds of billions of dollars to stabilize foundering financial markets.

Paulson will spend the weekend working with members of Congress to craft legislation paving the way for the largest government intervention since the Great Depression.

"We must act now to protect our nation's economic health from serious risk," Bush said in the news conference.

Bush said Capitol leaders have already been briefed on the urgent need for Congressional approval of the government's plan to buy bad debt, such as troubled mortgages, from banks and other financial institutions.

"These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions," Paulson said. "As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted."

Complete text of Bush speech.
Complete text of Paulson speech.

The Federal Reserve has extended a two-year $85 billion line of credit to American International Group, Inc. Federal officials said a fire sale of AIG assets could further damage the economy. AIG has promised to repay the loan, presumably from a more controlled sale of assets, at 11.5 percent interest. The line of credit is greater than the state of Nebraska's GDP last year (just over $80 billion).

Wall Street, apparently, was unimpressed. The stock market this morning has already given up yesterday's gains, dropping 200 points in early trading.

Wall Street took a major nose dive on Thursday amid reports of dismal back-to-school sales from many retailers and a rise in new applications for unemployment insurance.  The Dow fell 344.65, or 2.99 percent, to 11,188.23. It was the worst drop for the blue-chip index since June 26, when it fell more than 358 points, or 3.03 percent. For all the gory details, read on:

 

NEW YORK (AP) -- Dejected investors sent stocks plunging Thursday, hurtling the Dow Jones industrials down more than 340 points after retailers and the government added to a mountain of bad economic news and devastated hopes for a late-year recovery.
 
The market was already nervous as it waited for the government to release its August employment report on Friday. So news from the nation's major retailers that shoppers curtailed their spending last month due to higher gas and food prices came as a heavy blow.

Wal-Mart Stores Inc., the world's largest retailer, beat expectations because of its big discounts, but many teen retailers and luxury chains did poorly, a sign that consumers are spending mostly on essentials and putting discretionary buying on hold.

Meanwhile, the Labor Department said new applications for unemployment insurance rose by 15,000 last week from the previous week. That broadly missed expectations for a fourth-straight week of declines, heightening worries that the average American -- already feeling the effects of the weak housing market -- will have even less means to spend.

Furthermore, if the job market keeps deteriorating, it is tough for Wall Street to see a rebound in sight for the economy's biggest culprit: the tumbling housing market.

"You have to have a paycheck to pay that mortgage," said Craig Peckham, market strategist at Jefferies & Co.

The numbers released Thursday were a sign that despite some upbeat reports over the past month, the economy remains deeply troubled. Investors are not expecting any promising news in the August jobs report, particularly after the ADP National Employment Report said that private sector employment decreased in August by 33,000. Economists are predicting the government will report the eighth straight monthly payrolls drop, and a rise in the unemployment rate.

The market was so disheartened that it showed little reaction when the Institute for Supply Management said the service sector grew unexpectedly in August for the first time in three months as new orders increased and inflation moderated. The August reading of 50.6 was higher than the 50.0 expected, and the reading of 49.2 in July; but the sector's edging above the threshold between contraction and expansion was hardly a sign of a robust economy.

An economic recovery appears to be far off to investors -- and with the Dow down more than 15 percent for the year so far, they don't appear to be holding out for a significant upturn in stocks, either.

"We're seeing nothing but sellers," said Ted Oberhaus, director of equity trading at Lord, Abbett & Co. "In a bear market, you sort of really don't need an excuse to sell."

The Dow fell 344.65, or 2.99 percent, to 11,188.23. It was the worst drop for the blue-chip index since June 26, when it fell more than 358 points, or 3.03 percent.

Broader indexes also tumbled. The Standard & Poor's 500 index fell 38.15, or 2.99 percent, to 1,236.83, and the Nasdaq composite index dropped 74.69, or 3.20 percent, to 2,259.04.

All three indexes moved back into bear market territory, defined as a 20 percent drop from a recent peak. The indexes were at highs, including a record 14,198.09 for the Dow, last October.